Trust & regulation
Safeguarding, and why it is not FSCS
Money in an e-money account is not covered by the FSCS. It is safeguarded instead, which is a different mechanism with different failure modes. Here is what each one actually does.
In brief
What safeguarding is
Safeguarding is the FCA requirement that e-money institutions and payment institutions keep customer funds separate from their own money, so those funds can be returned even if the firm fails.
Funds sit in designated safeguarding accounts at credit institutions, or in liquid safe assets, and never form part of the firm’s own balance sheet. It is ring-fencing by rule rather than insurance after the fact, which is the whole difference between it and deposit protection.
Safeguarding and FSCS
are not alternatives
They protect against different things, and comparing them on “which is safer” misses what each one is for.
In one line: the FSCS is compensation after a failure, and safeguarding is segregation before one. Everything else follows from that.
- What it is
- FSCSCompensation paid out after a firm fails.
- SafeguardingSegregation of your money, maintained continuously while the firm trades.
- Can your money be lent out?
- FSCSYes. Lending deposits is the business model, and the compensation exists to backstop it.
- SafeguardingNo. An e-money institution cannot lend customer funds at all.
- Is there a limit?
- FSCS£120,000 per eligible person per authorised firm, raised from £85,000 on 1 December 2025.
- SafeguardingNo limit. The whole balance is ring-fenced rather than a capped portion being insured.
- If the firm fails
- FSCSThe FSCS compensates eligible depositors up to the limit.
- SafeguardingAn administrator returns safeguarded funds to customers ahead of the firm’s general creditors.
- If that goes wrong
- FSCSThe compensation scheme is the backstop.
- SafeguardingThere is none. The protection is that the money was never at risk, so the ring-fence has to have held.
Neither is better in the abstract. A bank deposit is insured but lent out; a safeguarded balance is not lent out but not insured. The failure you are protected against is different in each case, and a provider that will not explain that distinction is telling you something. Is my money FSCS protected? →
What changed on 7 May 2026
The FCA replaced guidance with hard rules, and the bar moved considerably.
Under policy statement PS25/12, with the rules in CASS 15 and supervision under SUP 3A, three obligations replaced what had been guidance.
Daily
Internal reconciliation of safeguarded funds against customer balances. Every working day, not monthly.
Monthly
A regulatory return to the FCA, so the position is reported rather than only recorded.
Annually
A safeguarding audit by a qualified auditor, with the first falling due within six months of the regime going live.
The proposed end-state, which would have held safeguarded funds under a statutory trust, has been paused pending further FCA review. So the supplementary regime is the law that applies today. Any safeguarding explanation written before 2026 is describing the old world, and if a provider’s trust page predates May 2026, that is worth asking about.
Who has to safeguard,
and who can opt in
Authorised EMIs and authorised payment institutions must comply. Small payment institutions are not required to safeguard but may opt in, which is worth asking about, because it changes what happens to your money if the firm fails.
In this group: accounts and e-money sit with Remittance360 Ltd, an FCA-authorised EMI (FRN 901072), and payments run through MDRN FX Services Limited, an FCA-authorised PI (FRN 540997). Both are inside the mandatory regime. VIP Payments Ltd is an FCA-registered Small Payment Institution, where safeguarding is optional by law. We tell you which regime applies to your funds before you commit rather than leaving you to work it out from a footer.
How to check any provider’s licence → · What is an EMI? → · Client money vs safeguarding →
Frequently asked questions
It is a different protection rather than a weaker one, and the honest answer is that they fail differently. FSCS compensates eligible bank deposits up to £120,000 per person per authorised firm after a failure, and the money it protects can be lent out while the bank is trading. Safeguarding ring-fences e-money continuously so it is never lent out and exists to be returned in full, but there is no compensation scheme behind it if something goes wrong with the ring-fence. We explain which applies to your funds before you commit.
No. The FSCS covers deposits at authorised banks, building societies and credit unions. Electronic money institutions and payment institutions are outside it, and instead have to safeguard customer funds under FCA rules. A provider that implies FSCS cover on an e-money account is describing something that does not exist.
The FCA rulebook chapter holding the safeguarding rules for payments and e-money firms, in force since 7 May 2026 under policy statement PS25/12, with supervision under SUP 3A. It requires daily internal reconciliations of safeguarded funds, a monthly regulatory return and an annual safeguarding audit by a qualified auditor.
The FCA’s proposed end-state regime, holding safeguarded funds under a statutory trust, has been paused pending further review. The supplementary regime under CASS 15 and SUP 3A is the law in force today, and any safeguarding explanation written before 2026 is describing the old world.
Remittance360 Ltd (FCA-authorised EMI, FRN 901072) and MDRN FX Services Limited (FCA-authorised PI, FRN 540997) are within the mandatory safeguarding regime. VIP Payments Ltd is an FCA-registered Small Payment Institution. SPIs are not required to safeguard but may opt in, and we tell you the position that applies to your funds before you commit.
Four questions. Are you a bank or an e-money institution? Where are safeguarded funds held? When was your last safeguarding audit? What is your FCA firm reference number, so I can check it myself? Compliant firms answer all four happily, and evasion on any of them is an answer too.
Talk it through with a specialist
Tell us what happened: sector, provider, timeline. You’ll get an honest read on your options, typically within one business day.
Prefer to write directly? Email info@vip-360.com with “urgent” in the subject line and what happened. It reaches the same specialists, and honesty about your situation speeds everything up.